Posted by Nick Day on 07 May 2015

Election Pension Tax Planning

With voting in the General Election under way today, taxpayers might want to act quickly to secure valuable tax reliefs on UK registered pension contributions.

Many of the parties involved in the Election are openly proposing cuts in the amount of tax relief available for UK pension contributions, either by limiting the rate of tax relief available or the annual amount that can be contributed.

Under present rules, you can contribute a gross amount of up to £40,000 a year to a pension plan and receive tax relief at your marginal rate of tax, so up to 45% or even up to an effective 60% rate if by making contributions you are able to have your Personal Allowance (PA) reinstated.

Personal Allowance for Pensions

The PA is lost at a rate of £1 for every £2 that your taxable income exceeds £100,000 so by making pension contributions you can lower your taxable earnings and possibly have your PA partially or fully reinstated. A combination of the 40% tax relief on contributions and the PA reinstatement gives effective income tax relief at a rate of 60%.

It is also possible to carry forward unused pension relief that you have not utilised in the previous three years, meaning that a sizeable pension contribution made now could qualify for generous tax relief. There is still time to act before the next Government potentially seeks to introduce new rules and if you need advice on your personal tax/pension position we are available to assist.

Contact Us for Pension Tax Planning

If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com.